Toronto, Vancouver: Housing bubbles or simply world-class cities?

Briefing highlights

Fitch projects ‘soft landing’ for housing
Maybe they’re not bubbles: Rosenberg
CIBC shakes up executive ranks
Cenovus chief Ferguson to retire
Britain charges Barclays in Qatar deal
Home Capital in mortgage sale
Air Canada’s Rovinescu on overbooking

Bubbles or something more?

Fitch Ratings is the latest to project a "soft landing" for bubbly Canadian housing markets, notably Toronto.

Which raises an interesting question posed by economist David Rosenberg: What if the Toronto and Vancouver markets aren't bubbles at all?

In a global economic outlook released Monday, Fitch joined a number of Canadian analysts in forecasting nothing harsher for a cooling period for Toronto.

Indeed, some economists raise the possibility of Toronto rebounding in time, following the lead of Vancouver, which slumped after government intervention but has since perked up again.

"Transactions in the frothy Toronto housing market have recently slowed following Ontario's measures to cool the market, and a shock to a non-bank mortgage lender," Fitch said without naming Home Capital Group Inc., which is the only lender to have been shocked.

"Our base case is for a soft landing in house prices as we see no immediate risk of a shock to either the labour market or interest rates."

The B-word has been on the lips of many as prices in Toronto and Vancouver rise ever further out of reach.

But Mr. Rosenberg, the chief economist at Gluskin Sheff + Associates, wonders if, rather than being in bubbles, those cities have simply been "re-rated" globally.

Certainly, observers around the world are alarmed by Toronto home prices, from the Bank of Canada, the Bank for International Settlements and rating agencies to the International Monetary Fund and Organization for Economic Co-operation and Development.

But much of the concern relates to the run-up in prices and associated mortgage debt, though affordability is certainly a big issue for policy makers.

High prices in and of themselves aren't unique to Toronto and Vancouver, however.

"When you look at these cities' home price-to-income ratios, benchmarked against their own individual histories and to the rest of Canada, it looks like a gigantic bubble," Mr. Rosenberg said in his report.

"But when you look at the two of them in a global context, they don't stand out as bubbles at all," he added.

"What they have done is to join the big leagues – and even on that stage, there many other cities from London to Rome to Tokyo to New York to even Sydney, that still command a premium to the Greater Toronto Area."

Mr. Rosenberg isn't saying the increases aren't extreme, rather that the prices themselves befit "major cosmopolitan areas" in a country deemed desirable and stable.

Add to that a cheap currency that means more buying power for certain expats, economists say.

Other studies have agreed Canada is a desirable destination for expat employees, and that elevated home prices aren't a deterrent for certain people.

A recent report from ECA International, for example, ranked Canada as No. 15 in terms of expense for expat middle managers, below the average, with the company saying at the time that compensation packages are lower because employers don't need big incentives to attract people here.

CIBC shakes up its ranks

Canadian Imperial Bank of Commerce is shaking up its executive ranks, promoting from within to put fresh blood in charge of its retail, commercial and wealth management businesses, The Globe and Mail's James Bradshaw reports.

As more than 40 executives move to new roles, two influential figures are departing. Head of retail and business banking David Williamson, a holdover from the bank's previous regime who had held the same job since 2011, will serve in a transitional role until he leaves next year. Wealth management head Steve Geist is also on his way out at the end of 2017.

The jobs they are vacating will be redrawn, altering the bank's leadership structure and reshuffling its succession planning.

Ferguson to retire

Brian Ferguson is retiring as Cenovus Energy Inc.'s chief executive officer.

This comes as the energy giant tries to win over investors upset by its recent multibillion-dollar oil sands deal, The Globe and Mail's Jeff Lewis reports.

The company is now seeking his replacement.

Cenovus also rolled out a five-year strategy update saying it aims to generate 14-per-cent annualized free funds flow growth through 2021. The company said it would boost production at a 6-per-cent compound annual growth rate.

Jeff Lewis: Cenovus chief Ferguson to retire

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